Former Liquor Board Chairman Stephan W. Fogleman represented the applicant, who was present with his general manager. Fogleman began by presenting the Board with a signed MOU with the Mount Vernon Belvedere Association.
Fogleman explained that Stang of Siam has been in operation for six years and is a restaurant with 76 seats. He submitted an appraisal of the improvements to the business as well as a sample menu.
The restaurant applied for and received a Class B restaurant license in 2011, when the license was first transferred to Mr. Carraghan’s wife, who now lives in Thailand. The applicants are applying for a new license, after their former Class B expired in April 30, 2015. They have not invested any new money into the business since 2011; they are requesting the new license using the original 2011 investment. Mr. Fogleman said that he did not believe that anything in the statute forbade this practice.
Commissioner Greenfield inquired further about the history of the expired Class B license, saying, “I want to make sure we’re not double-counting here,” adding “I don’t want the previous license to have been obtained because of this same $200,000 investment.” Fogleman replied that the previous license was obtained with the same investment.
|Issues raised in audit present in this case or other issues observed
There are two main questions of statutory interpretation in this hearing: First, when a licensee is applying for a new Class B license, how old can the required capital investment be? The second issue is, if you’ve made a capital investment and been awarded a Class B license, can you apply for another one without making a new capital investment? The answers to both of these questions are not spelled out in the statute or in case law, so they require some careful thought and explanation by the commissioners.
For the first question, the age of the capital investment, the Chairman noted in the hearing that if the investment had been made “in 1956,” it would have been a different situation. He seems to be acknowledging, then, that there is an appropriate time period within which the capital investment should have been made in order to qualify for a new license. So what is the line, then, beyond which a capital investment is too old? This determination, which seems to lie somewhere between five years and sixty years, seems like one that the agency should promulgate in its rules and regulations, for greater clarity.
On to the second question, about whether there can be multiple licenses borne out of the same capital investment. In the context of the city-wide moratorium on new licenses, the Class B restaurant license is a special case: one of the very few types of licenses that can be obtained by application to the Liquor Board instead of via transfer of an existing license. The original legislative history is difficult to access, since the statute is so old, but one could reason that the capital investment requirement exists to encourage economic development in the city by providing a large benefit – a liquor license – to restauranteurs who have updated and improved their properties. Under this presumed legislative intent and in light of the oversaturation of licenses and the moratorium on new licenses, why would the Board be allowed to create an additional license, which would normally be prohibited, without evidence of additional investment? If the license had not expired due to mismanagement but instead had been sold and transferred elsewhere, would the licensees have been entitled to apply for another Class B license in that case? Class B licenses are not the most valuable type of liquor license, but could, hypothetically, a licensee create and then sell multiple Class B licenses out of the same $200,000 capital investment? This seems like a ridiculous idea, but it’s one that would fit within the commissioners’ understanding of the statute.
The concern in situations like these, where the statute is vague, is not that the Liquor Board must come to any one “correct” answer. Ideally, though, the commissioners should have taken the time to look at the statute, read the relevant section aloud during the hearing, discuss the purpose and context of the greater Alcoholic Beverages Article and its goals, and give a full discussion and description of why they came to the decision that they made. Instead, unfortunately, the commissioners voted in favor of the application without much substantive discussion other than noting that it was a confusing situation. This leaves the door open for future confusion in future cases.